Travel Insurance Policies: What Do You Actually Need & What Do They Cover?

Evacuation insurance, extortion insurance, annual insurance — what kind of protection do you really need?Read More

What's covered by your travel insurance company? Read on to find out. (Source: iStock / Photography)

Some of us are just fine booking our plane tickets and reserving hotel rooms without a security blanket (read: travel insurance), but others are keen to protect every dime they spend on a vacation. The question is: How much of the travel insurance is really necessary? And what does it cover? Here’s a guide to help you through it as you map out your trip:

What kinds of travel insurance are there and what do they cover?

Given the remarkable diversity in trip types and activities, there are actually quite a few different kinds of travel insurance out there. Some of them are a total racket, however, so consider what you actually need. For starters, take a look at this quick rundown of the types of insurances commonly available to travelers:

  • Comprehensive insurance: While the exact coverage is dependent on the insurance company, comprehensive insurance generally covers loss of personal items, medical expenses, and trip cancellation. Be sure to read the fine print on this, though; some coverage types (like cancel-at-will insurance) will cost extra.
  • Trip cancellation insurance: Not to be confused with cancel-at-will insurance, trip cancellation insurance covers the cost of plane tickets, hotel bookings, and car rentals if you need to cancel a trip for reasons outside of your control. Common cancellation reasons include illness, injury, inclement weather, and work-related reasons. You will likely need to supply a signed form from your doctor/boss noting the reasons for cancellation.
  • Medical insurance: Yes, you likely have medical insurance already, but does it cover you abroad? Insurance companies will often offer supplemental coverage to give you peace of mind should you get ill or suffer an injury on your trip. Keep in mind, however, that most countries won’t process this insurance upfront; you’ll likely have to pay out of pocket then request a reimbursement once you return to your native country. Also, the coverage might be very limited, so check terms and conditions.
  • Evacuation insurance: While often passed over by travelers, this type of insurance is becoming increasingly popular due to the rise in natural disasters and dangerous political upheaval across the globe. Keep in mind, however, that evacuation in this case is only covered for illness/injury caused by disasters and upheaval or other, unrelated reasons.
  • Baggage/personal item loss insurance: Lose some valuable clothing or jewelry? Or maybe your suitcase was lost in the travel ether. This insurance will cover the cost of the items you lost, but you might not be able to recoup those losses until after you’ve returned home. Always be financially prepared to replace essentials when abroad.
  • Accident insurance: This type of insurance covers you in the evident of a transportation accident (car, bus, train, or plane), and again, is limited to medical cases. If you’re worried about damage to vehicles when renting a car, be sure to check with your car rental agency about coverage.
  • Trip interruption insurance: Another insurance most travelers deem unnecessary, these plans cover you if you have booked travel and need to forfeit tickets mid-trip due to unforeseen circumstances.
  • Kidnap, ransom, and extortion insurance: Largely focused on corporate travel, this type of insurance helps when a high-profile traveler is subject to well, kidnapping, ransom, and/or extortion. Most travelers won’t need to worry about this.
  • Annual travel insurance: For frequent travelers, some agencies will offer annual travel insurance policies. The coverage varies, but largely overlaps with comprehensive plan coverage.

Are there limits to insurance coverage?

In short, yes. Depending on the type of insurance you get, you’ll likely be limited to a certain amount of coverage. For example, a common coverage ceiling for baggage and lost personal items insurance is $1,000. Medical insurance and evacuation ceilings are often in the $50,000 range (though include up to a $2,000 deductible). Travel ticket reimbursements for cancellation insurance vary significantly, though often have fine-print restrictions noting that only the amount non-refundable by booking agencies/airlines/hotels can be reimbursed. Also keep in mind that you sometimes have a limited amount of time to request reimbursement.

Is evacuation insurance really necessary? Depends on where you're going, what you'll be doing, and how healthy you are. (Source: iStock / josefkubes)
Is evacuation insurance really necessary? Depends on where you’re going, what you’ll be doing, and how healthy you are. (Source: iStock / josefkubes)

How do I know what insurance to get?

Your travel insurance needs will depend largely on the nature of your trip, your destination, your transportation type, and your personal physical condition. Before paying for anything, it’s recommended you check with your existing insurance (health, car, and home/rental) or credit card providers to see what’s covered during travel. Then, consider your investment in the trip to determine what type of insurance you need to recoup expenses should the trip be a total loss. If you go with a comprehensive insurance plan, expect to pay 4-8% of the total cost of the trip. For more guidance, take a look at this handy guide from NerdWallet.

What fine print should I be aware of?

As with any contract or purchase, we recommend you read the fine print yourself before signing on the dotted line. That said, here a few common things travel insurance fine print will note:

  • Restrictions on reimbursements/payouts based on dates/deadlines, other insurance coverage, other agency/airline refunds, and special circumstances
  • Certain medical conditions that are not covered, including complications that arise from pre-existing conditions
  • No coverage in the event of certain risky traveler activities (like heli-skiing) or unexpected trip destinations (especially to dangerous regions/areas)
  • Trips that extend longer than a certain period of time, excluding them from coverage
  • Time to issue reimbursements, often with required review by agency reps
  • No coverage for pets
  • Any limitations on stated coverage for extenuating circumstances
Don't get hung up on the possibility of losing your luggage. Get some personal item insurance coverage and rest easy. (Source: iStock / dimarik)
Don’t get hung up on the possibility of losing your luggage. Get some personal item insurance coverage and rest easy. (Source: iStock / dimarik)

How do I know if a travel insurance company is trustworthy and reliable?

Insurance can disingenuously compel you to shell out serious bucks for coverage you don’t really need, but established, reputable agencies can also be a serious help in travel crises. If you’re wondering which agencies are tops, consider the following:

  • If you’re booking tickets with an established cruise line or airline, see if they have an insurance partner. These will often be promoted when you book your tickets and are usually established, reputable companies.
  • Generally, favor companies you’ve heard of over companies you’ve never heard of.
  • Check the rankings of top agencies on sites like Travel Insurance. If you don’t see a quote pop up from an insurance company you found, avoid it.
  • If your current home/car insurance provider doesn’t offer travel insurance, ask them for a recommendation.
  • Take a close look at the terms and conditions of agencies you suspect are questionable or simply know nothing about. Those that are just trying to make a quick buck will often have ridiculous limitations and restrictions.
  • Lean on the recommendations and ratings of known review sites like NerdWallet.

When in doubt, know as much as you can about your personal needs and an insurance company’s offerings before committing to a policy. Always read the fine print and be prepared for contingencies if/when coverage is stopped or pulled.